More on Rural Health Care and Certificate of Need Laws

After my last post on certificate of need laws (CON laws) went up earlier this week a colleague rightly noted that the paper only addressed the quantity of facilities available in the rural areas of a state, not the quality of the care provided.

I think this recent post is at least a step in that direction. The authors examine the availability of imaging services in states with and without CON laws and find that:

These CON requirements effectively protect established hospitals from nonhospital competitors that provide medical imaging services, such as independently practicing physicians, group practices, and other ambulatory settings. In the process of protecting hospitals from these nonhospital providers, CON laws limit the imaging services available to patients.

The existence of a CON law decreases MRI scans by 34 percent, CT scans by 44 percent, and PET scans by 65 percent, all relative to states without CON laws.

As Hayek argued in the conclusion to his Nobel speech:

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.

CON laws have nothing to do with licensing of practicing physicians but with planning by state committees exactly how and in what manner new health care services will be established. The problem is that centrally planning (at the state level) this type of activity presumes that regulators possess knowledge they very well may not. It may very well be that hospital administrators and investors have a better grasp of the needs of their communities than state planning boards.

While CON laws may have important benefits, Stratmann and Baker find equally important drawbacks.